- You earn a series of promotions at work, but when it comes time to make a lateral move, you find you’ve neglected to build a professional network that will help you make the next jump.
- You compartmentalize your success in badminton and realize too late you’ve neglected all your friendships and nobody is there to celebrate your wins when you retire from sport.
- You are so determined in your plan to succeed that you refuse emerging opportunities to succeed in a different way altogether.
These are just some of the many ways to fail at a long-term game even as you succeed in the short-term ones that make it up. It turns out this is a common mistake that arises because we live in a non-ergodic world. It’s a real problem in our decision making.
You might not have encountered ergodicity unless you have a background in statistical mechanics or probability theory. It’s the idea that what happens over short periods can be extrapolated to the long run using the law of averages. Recently I was introduced to the idea by Italian independent researcher Luca Dellanna, who spoke at value investing ideas conference VALUEx in Omaha. In his books he applies the concept of ergodicity to everyday life and points out that in the real world, very little actually works this way.
Long-term games, like growing a business or building a flourishing family life, tend to be composed of a series of short-term games. To ‘win’ the long-term game, it is not the right strategy to launch into those short-term games with an eye to win them. Instead, game theory suggests you should usually be approaching one short-term game—an interaction with a customer, a morning workout, a dinner with friends—with an aim to improve the next one.
Do you go hard every time you go running, risking injury and enduring general misery, just so that you fit in as much exertion that day as you can? Or do you build a strong aerobic base at a lower intensity for most of your runs? Perhaps you even reward yourself at the end with a luxurious rest by the waterfront while you cool down, reinforcing the idea that working out feels good so you’re less likely to skip tomorrow.
Ergodicity seems to have made its way unexamined into my planning. I look back at my work agenda and see a series of weeks that I tried to win, with an unspoken implication that 52 week-long sprints makes for a successful year. Dellanna’s ideas have me questioning the approach because you can only really optimize for one timescale. For example, some of those sprints came at some small cost to my health. At the longer timescales, you need to be more focused on sources of failure than on your performance on any given day.
To add confusion to an already counterintuitive idea, there really are people who achieve extreme success by winning all those short-term games. That’s only because there are lots of people. A few at the tail end of the curve can play Russian roulette 10,000 times and survive, then tell you how success is achieved by taking repeated risks. By definition, you don’t meet the others.
Dellanna points out that by maximizing your best outcome, you’re decreasing your average outcome. When there’s a threat of irreversible loss, it’s sometimes best to focus on maximizing your worst outcome in the distribution. And in the long run, survival is far more important than performance.
For more on ergodicity and winning long-term games, here are Luca’s books, which break them down simply:
Winning Long-Term Games: Reproducible success strategies to achieve your life goals